This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

CEZ ShpŰrndarje SHA (the “Company”) is the power distribution company of Albania, which was privatized in 2009. The Company operates under the power distribution system operator and retail public supplier licenses, serving around 1.1 million customers. The project is to provide long-term financing to the Company to support its 2009-2013 investment program, which is aimed at reducing distribution losses, enhancing operational efficiency, improving reliability of electricity supply and connecting new customers (“the Project”).

Project sponsor and major shareholders of project company

CEZ is the largest power utility in the Czech Republic, one of the ten largest utilities in Europe and an existing IFC client through IFC’s investments in AkEnerji (Project No. 29359) and SEDAS (Project No. 27559). The CEZ Group has an installed power generation capacity of around 14.8 GW and a customer base of 9.3 million in the power markets of Central and Southeastern Europe. CEZ currently has power distribution operations in the Czech Republic, Albania, Bulgaria, Romania and Turkey.

CEZ owns 76% of CEZ ShpŰrndarje and the remaining 24% is owned by the Ministry of Economy Trade and Energy (“METE”), Albania.

Total project cost and amount and nature of IFC's investment

The Company’s 2009-2013 investment program, starting from CEZ’s acquisition of the Company, is expected to cost around €154 million and will consist of the following measures:

(i) rehabilitation, strengthening and extension of the Company’s distribution network and other facilities to reduce energy losses and improve system reliability;
(ii) installation and upgrade of meters to reduce meter tampering and enhance meter reading to improve collection;
(iii) connection of new customers, and
(iv) modernization of the Company’s management and financial information systems to improve management controls and improve billing capabilities.

The proposed IFC investment consists of an A loan of up to €50 million to CEZ ShpŰrndarje for IFC’s own account. The European Bank of Reconstruction and Development (“EBRD”) is also considering a parallel tranche for a similar amount. The Company’s internal cash flows as well as additional external financing are expected to provide further financial resources to fully fund the Company’s 2009-13 investment program.

IFC investment as approved by Board

69.16 million (USD)

Product Line

IFC Investment (million USD)

Risk Management

Guarantee

Loan

69.16

Equity

* These investment figures are indicative

Location of project and description of site

CEZ ShpŰrndarje is the sole electricity distribution and retail company in Albania. The Company owns, operates and maintains Albania’s electricity distribution system in medium and low voltage lines (from 35 kV to 0.4 kV), including substations (110 kV/35kV) and 35 kV step down substation transformers. The Company currently serves around 1.1 million customers throughout Albania.

Anticipated development impact of the project

The Project’s expected development impact is as follows: (i) supporting the expected technical and financial turnaround of the power distribution sector in Albania, which in turn would improve sector sustainability and growth; (ii) enhancing energy efficiency through reduction of energy losses; (iii) upgrading and expanding the power system to improve the reliability and quality of electricity supply; (iv) increasing electricity access, especially for the poor and rural communities in one of the poorest countries in south-eastern Europe; and (v) supporting the country’s power sector reform. Through the above, the Project is expected to deliver positive fiscal impact and contribute to Albania’s long-term growth prospects.

IFC's expected development contribution

IFC’s additionality in this Project will include: (i) providing significantly longer tenor financing than is generally available in the Albanian market; (ii) offering its stamp of approval in support of the Company’s privatization and its turnaround plan; and (iii) strengthening the Company’s environmental and social management systems and policies, in line with WBG requirements.

Environmental and social issues - Category B

The Project has been categorized as a category B project according to IFC’s Procedure for Environmental and Social Review for Projects because the implementation of the Company’s investment program aimed at reducing distribution losses, improving efficiency and reliability of supply, and improving the financial and operational performance of the Company is expected to: (i) have limited adverse social and environmental impacts that are few in number, largely reversible, and can be readily addressed through mitigation measures, and (ii) have positive impacts on the Company’s environmental and social performance.

Key environmental and social issues reviewed during appraisal included the Company’s environmental, health and safety management system, labor and working conditions including occupational health and safety and retrenchment of employees, pollution prevention and abatement (e.g. management of PCB contaminated transformers, leakage of transformer oils at used transformers storage areas), and community health and safety management.